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I’ve been a reader of Ed Brill’s blog for several years, not because of any particular interest in the IBM/Lotus products that he long championed, but because he’s just so good at blogging.

Brill was a longtime product manager for IBM’s Social Business products, where he fought an uphill and often public battle against Microsoft. Brill’s barbs were notable because IBM’s buttoned-down culture had historically discouraged direct public engagement. How did a product manager get away with poking a stick in the eye of a major competitor?

The fact that he did get away with it is one of the sub themes of Opting In, Brill’s new book about social product management. “Only twice did someone ask for me to be fired at the chairman’s level,” he jokes. That seems funny today, but at the time it was a bold test of new management principles that challenged IBM’s 100-year-old prohibitions against individual expression.

Brill’s engaging and readable book is aimed at product managers, those corporate jacks of all trades who fret about everything from market research to customer support. Product managers are the ones who ultimately take the credit or blame for a product’s performance in the marketplace, and Brill sees social media as their ally at almost every level. Opting In covers everything from Google Alerts to Pinterest, and Brill not only outlines the unique utility of each of these tools but usually provide stories to support his points.

Telling Stories

For me, the benchmark of an enjoyable business book is storytelling, and Opting In has stories aplenty. They include detailed accounts of some of his more notable confrontations, such as a 2004 dustup with the influential Radicati Group and a 2010 challenge to a controversial Gartner report. Conventional wisdom holds that you don’t pick fights with these influencers, but Brill went to war and lived to tell about it. The explanations of his reasoning behind these actions are valuable competitive intelligence for any product manager.

Ed Brill

Most of the tales in Opting In are more upbeat. For example, Brill tells how a single tweet on a trip to Sydney led to a meeting with a local follower and fellow foodie and a friendship that has lasted for years. Social media is about more than business, he emphasizes. Those glimpses into your experiences, hobbies and interests create touch points that lead to meaningful relationships.

Product managers will learn much from scrutinizing Brill’s insight on topics common to the profession. He introduces the concept of “progressive disclosure” as an alternative to the traditional Big Bang product announcement, with the idea being to use social media to build awareness and buzz leading up to the communication of the news.

He describes how Lotus has increasingly moved toward open product development as a way to integrate user feedback into the process and even shares a story about how his group handled an unforeseen customer backlash to some changes that everyone expected to be a hit. Fellow product managers will relate to all of this.

Opening Up

The hero of the book is IBM’s Social Computing Guidelines, which get a full appendix entry of their own. Brill frequently praises these rules, which are often cited as a model of social media policy, for giving him the courage to take on some of his more notable battles and to continually give voice to his opinions.

The guidelines, which were first drafted in 2005, have changed IBM fundamentally. To dramatize the scope of that change, Brill recalls how he was slapped down by corporate communications in 2003 for identifying an employee in a blog post because, “we don’t have celebrities at IBM.” Less than a decade later, IBM was running ads celebrating individual employees.

“The guidelines…signaled to employees, clients and the market that IBM would stand behind its [people],” he writes. In a day when corporate loyalty seems almost a quaint historical curiosity, the kind of faith must be pretty empowering.

Full disclosure: I have a consulting relationship with an IBM subcontractor.

For the past year, business professionals have connected to each other online as never before. Now marketers are trying to figure out a way to monetize these new networks.

The MySpace effect finally seeped into the business world, triggering explosive growth for the new darlings of social networking: Facebook and LinkedIn. Both networks had breakout years, with Facebook breaching the 60 million-member mark. LinkedIn, with 20 million members, broke from the pack to become the place where business people make contacts, find jobs and develop professional relationships.

Social networks are proving to have the kind of stickiness that marketers have long dreamed of. People give up all kinds of details willingly in the name of furthering friendships. Facebook’s early 2007 decision to open its platform to developers has created a gusher of 16,000 new applications. While few have gained much traction, marketers are pushing ahead in hopes of inventing a megahit like Scrabulous.

The battle for supremacy in the broad social network market is effectively over. MySpace and Facebook together account for 88% of all visits to social network sites, according to HitWise (LinkedIn wasn’t included in those totals). Although MySpace holds a three-to-one advantage in total visitors, users actually spend more time on Facebook, according to comScore Inc. Emory University surveyed its incoming freshmen last fall and learned that 97% had Facebook accounts.

YOUTUBE A BIG WINNER

Another big social networking winner is YouTube, with 66 million videos. Although widely perceived as a playground for backyard videographers, YouTube has had some notable b2b successes. IBM’s tongue-in-cheek “Mainframe: Art of the Sale” videos have grown traffic to its associated blog tenfold. JetBlue Airways CEO David Neeleman took to YouTube to explain the February 2007 crisis that left thousands of travelers stranded.

Social networks are now springing up in vertical professional communities. Sermo claims to have 50,000 members in its online physicians network. Big winners overseas are virtually unknown here. They include Orkut.com (Brazil), Cyworld.com (Korea), Mixi (Japan) and Grono (Poland), to name a few.

Now the vexing question is how to market to these groups.

Social networks have remained stubbornly resistant to promotional campaigns. Many experts believe that’s because the intensely personal interactions between members prohibits traditional interruption marketing. MySpace has made the most progress. Researcher eMarketer expects it to generate $820 million in advertising this year, nearly four times the estimate for Facebook.

But there have been disappointments. Google’s subpar fourth-quarter results were blamed, in part, on MySpace advertising shortfalls. And recent data has indicated that social network traffic is leveling off.

B2b marketers have been wary about social network campaigns. For one thing, the conversation is unpredictable. Reliable metrics still don’t exist and the paucity of success stories has also dampened enthusiasm. Then there was the outcry over Facebook’s social shopping experiment, called Beacon, which let members see each other’s purchasing activity, sometimes without their knowledge. Marketers wrestle with how to engage an audience that shuns messaging. Visit top10bestpro to learn more about online shopping services.

Social media thus stands at an awkward transition stage: businesses overwhelmingly understand its importance but are unsure of how to take advantage of it. While 78% of respondents to a Coremetrics survey said social media marketing is a way to gain competitive edge, they’re spending less than 8% of their online marketing budgets there.

BLOGS GO MAINSTREAM

They aren’t nearly as curmudgeonly about blogs, however. Corporate activity in the blogosphere has ramped up even as the hype has died down.

Recent entries into the blogosphere include Marriott, Johnson & Johnson, Toyota and Wal-Mart and other car and scooter brands. Even the Transportation Safety Administration has gotten into the act, giving five midlevel employees the green light to blog on behalf of the organization about the practices that befuddle frequent travelers.

There’s a trend here. B2b marketers are finding that employees can be powerful and persuasive advocates of the company message. Microsoft and Sun both claim to have more than 5,000 employee bloggers, and corporate giants like Southwest Airlines and Kodak have structured their blogging initiatives around ordinary employees and even customers.

The surprise social media winner has been podcasting. Those downloadable radio programs have turned out to be a hit with time-challenged business people.

Emarketer estimates that the U.S. podcast audience grew 285% in 2007 to 18.5 million people and will hit 65 million people in 2012. More importantly for b2b marketers, Arbitron reported that 72% of podcast listeners are older than 25 and 48% are older than 35. General Motors, Purina, HP, IBM, Kodak, Wells Fargo and many others are using them to reach business influencers.

It all adds up to a chaotic scene, although there are signs that consolidation is setting in and the flood of new services is slowing.

It’s no secret that the factors that motivate salespeople to change the way they work have to be pretty simple: Help them spend more time selling and less time scrounging for information and telling managers what they’re doing.

So when IBM began to introduce the concept of “social selling,” it chose a test base of a few hundred salespeople and their managers to build a set of integrated systems that improved productivity and reduced administrative overhead. In a presentation to the SugarCRM SugarCon conference in San Francisco earlier this week, Gary Burnette, vice president of sales transformation at IBM, told how the implementation team at IBM succeeded in making social selling a coveted goal rather than another set of rules and reports.

“We didn’t think of it as social selling; we thought of it as improving sales productivity,” Burnette said of the pilot. “It was about returning value and time to our sales teams for their time invested.”

Familiarity Breeds Intent

The program began with the assumption that nearly every salesperson was already familiar with the value provided by Facebook and LinkedIn in their personal lives. The tools made it easy to find information and expertise by consulting friends. Those same capabilities could be useful as a formal part of the business process.

A key goal was to simplify reporting, an already distasteful task that becomes more intrusive as the end of the quarter nears. Management has a constant need for information about the status of different sales opportunities, and as a result “We’ve had sales people called out of client meetings to answer questions from upline sales execs,” Burnette said. Much of this information was locked up in Excel spreadsheets owned by individual reps. The only person who could answer a question was the representative on the account.

IBM built a sales force automation system based on SugarCRM, Websphere and Lotus Connections to enable collaboration and streamline visibility into the sales cycle. Cognos and SPSS analytics were applied to better qualify opportunities and improve forecasting. As a result, salespeople now know more about their prospects and managers have better visibility into progress against goals.

Opportunity reports were replaced with an “activity stream” approach similar to the Facebook timeline that enables salespeople to document the status of each opportunity on an ongoing basis. Management can peek into the status of opportunities at any point in the process and get the latest information. As a result, lag times have been cut from five days to almost nothing and report preparation has been significantly reduced because everyone has access to the same information.

“I don’t think most senior sales executives have any idea how many people are behind the scenes creating reports and forecasts,” Burnette said. “If managers are in collaboration with their teams the information is more accurate and less filtered.”

All members of the team can now apply social tools like tagging and profiling to identify and recommend experts who can help solve customer problems and closed deals. “The management team is helping the seller sell instead of asking why they aren’t selling,” Burnette said.

Critical Success Factors

A project this ambitious can’t succeed without support at three levels: top management, brand managers and the reps on the street. The fact that new IBM CEO Ginni Rometty had endorsed the project before she even became CEO was a godsend, Burnette said. Also critical was involving users in the development of the dashboard. Nearly 800 sales reps gave feedback at every step. Brand leaders helped in strategic direction so that the most important information would be the easiest to find.

Social selling is now being woven into the mainstream of IBM’s business process, but adoption was never a sure thing.

“Becoming a social business is a transformational journey,” Burnette said. “The onus has been on us to translate these systems into something that has clear business value.” As word-of-mouth has grown, the new social selling process has taken on a life of its own. “It started with us deliberately selecting the people to participate, but now it’s ballooned to the point where people are saying, ‘I want to be a part of this.’”

This is one in a series of posts sponsored by IBM Midsize Businessthat explore people and technologies that enable midsize companies to innovate. In some cases, the topics are requested by IBM; however, the words and opinions are entirely my own.

Social business isn’t about tools and promises. It’s about giving people at every stage in the sales cycle the incentive to adopt tools that make their jobs easier and contribute to customer satisfaction.

Photo via NigelBeck.com

IBM started with that simple premise when it tackled the task of convincing its sales and marketing people to adopt a new way of doing business. Traditional tactics involved too much interruption and intimidation, which ultimately made sales people less successful than they could be, said Nigel Beck, IBM’s VP of Business Development for IBM Collaboration Solutions & Social Business in a speech to the SugarCRM SugarCon conference in San Francisco this morning. The challenge was to make social business a win for the people doing the selling.

IBM has been a leading adopter of social business principles, which Beck defined as “the application of social tools and culture to business processes and outcomes. It’s basically using social stuff to do work stuff,” he said. A key value of social networks to our daily lives is that they make it easier to find people who can help us get answers and save time, so why not apply those same goals to sales?

The social business initiative was organized around three key tasks:

Customer care and insight;

Workforce optimization; and

Product and service innovation.

The first goal was addressed by rethinking the traditional marketing process, which Beck characterized as “pushing messages down customers’ throats and then flogging the salespeople to pursue leads.” This approach leads to an over-emphasis on reporting, which distracts salespeople from understanding their customers so that they can keep higher-ups apprised of how the sales process is proceeding.

In contrast, a social business approach has marketing organizations getting to know customers. “They hang out where customers hang out, build relationships and help them become part of our family,” he said. “The tools help build trusted relationships.”

Sales people are empowered with tools that help them quickly identify resources within the organization that can help customers solve problems. When all those customer touches are documented, “the reports and graphs are generated in the background.” The pitch to salespeople is that they can spend more time making customers successful and less time doing paperwork.

The other part of the equation is supporting customers better. Beck wryly described traditional customer support as “the process of torturing customers to death. They need to find the right department and fill out the correct form and if they fill out the wrong form we delete it.” By stressing the role of sales as problem-solver – and by involving the community of customers in solving each other’s problems – support frustration is reduced.

Beck pointed to examples of customers that are adopting social business tactics in their own markets. Amadori is an Italian food processor specializing in poultry that created a network of micro sites that combine company and public information to answer common questions.

Omron is a global maker of industrial and consumer sensing and control technology whose European operation created a social portal to help people find answers or people who can help them.

From a management perspective, the key to social business change is to reverse the standard mindset, Beck said. “We’re making the transformation from managing the seller to enabling the seller.”

This is one in a series of posts sponsored by IBM Midsize Businessthat explore people and technologies that enable midsize companies to innovate. In some cases, the topics are requested by IBM; however, the words and opinions are entirely my own.

Palmisano is disarmingly modest and candid in an interview with Wharton management professor Michael Useem as he discusses his “temporary stewardship” of the IBM legacy. Like many successful CEOs, he is guided by a few simple and logical principles: Always put the organization first, think long-term and leave the company better than you found it.

Palmisano speaks honestly about the mistakes IBM made that nearly capsized the company 20 years ago and how those lessons changed him as a leader. Among the topics he covers:

The controversial decision to sell the PC division to a Chinese manufacturer and why the sale intuitively made sense;

Why IBM has continued to invest $6 billion annually in research and development, even during tough economic times;

The toughest decision he made a CEO: restructuring IBM’s pension plan.

What he learned from his college football career and why he’s glad he turned down the opportunity to try out with the Oakland Raiders in 1973.

Palmisano has kept a low public profile during his tenure as CEO, so the opportunity to see him let down his guard a bit and talk about his personal style is a rare treat. I came away from it with greater respect for the man and even the impression that he’d be a good guy to have a couple of beers with.

The initiatives are the second stage in an evolution of the social business theme that began with the introduction of the the IBM Connections platform last year. “These offerings are all about how to leverage the technology to drive business outcome,” said Sandy Carter (left), IBM’s Vice President of Social Business Evangelism. “It’s about what engagement strategies to user and how to turn social business into money.”

The offerings are also part of an IBM drive to sell its services at a higher level. The linchpin of the program is strategic consulting from IBM Global Business Services that focuses on how to restructure organizations about seamless collaboration and information discovering. This morning’s Lotusphere opening session repeatedly hammered on the theme of organizational transformation. “Five years from now, the people who win will be talking about a completely new way of doing business, one with new platforms, cultures, skills and insights,” said Alistair Rennie, IBM General Manager of Collaboration Solutions.

IBM is partnering with partners to deliver training and specialized consulting services. The partnerships are intended to speed delivery of services globally and also to build an ecosystem around the social business concept, IBM would clearly like to own. Dachis Group will provide a “social business adoption quickstart workshop” and Group Business Software will provide services to make Lotus Notes applications Web- and mobile-accessible.

The term “social business” has been gaining traction in the last year. Mentions of the term on the Internet grew from two million in 2010 to about 20 million in 2011, according to an informal Google search. Social business differs from social meda in that “Social media touches mainly on marketing and PR, whereas social business goes inside the organization to include the way you recruit and retain talent and how you work with your supply chain,” Carter said. “It’s not just about demand generation but incorporating social it into all aspects of your business.”

This is one in a series of posts sponsored by IBM Midsize Businessthat explore people and technologies that enable midsize companies to innovate. In some cases, the topics are requested by IBM; however, the words and opinions are entirely my own.

Michael J. Fox kicks off as guest speaker, telling about his diagnosis with Parkinson’s Disease at the age of 29 and how it sparked his interest in the Internet. “I found out I was part of a community.” Web activism has enabled him to raise $270 million to battle Parkinson’s. Fox’s brief speech isn’t very relevant to social business, but the audience receives him well.

IBM’s Alistair Rennie kicks off the core session.There’s nothing new about social business, he says. It’s about sharing ideas and trust, having those actions persist so we can learn from them. We finally have a way to deliver those insights in a ways that they can be used at that moment.

IBM’s internal think tank, the Institute on Business Value, discovered that collective intelligence delivers three major benefits:

Discover new ideas

Leverage skills and distribute workload

Improve forecasting effectiveness

Alistair Rennie at Lotusphere 2012

There are many ways to apply these benefits, ranking from improved product design to global sales contests. “Ultimately, Social Business is a competitive differentiator.”

This is not new tools, it’s a complete reinvention of systems that form the core of how a business operates. Five years from now, the people who win will be talking about a completely new way of doing business, one with new platforms, cultures, skills and insights. “This is rethinking. It’s like Moneyball: analytics + baseball = new game.”

When you get serious about transformation, you stop thinking about tools and start thinking about platforms. It means a core platform for communications, botn internal and external, Rennie says. “I would shut off e-mail if I wasn’t running Lotus Notes.” Like many core technologies, e-mail has been abused.

The Social Business platform that IBM is building has these components:

Social networking

Content

Analytics

We need deep analytics around everything in the organization. This is what drives business change, Rennie says.

Together, these create a platform for action that transforms process and innovation.
“Social Business cannot be an IT project,” but IT must be closely involved. “If you understand the potential of social business, grab a Red Bull and a nearby nerd and get going.”

The Demos Begin

It’s impossible to describe all the screen stuff going on during the fast-paced demo portion of the program, but here are some highlights.

IBM’s Jeff Schick introduces a demo of the new Lotus social business platform, which borrows liberally from Facebook, Hootsuite and paper.li. The user interface is a Facebook/Google+-like internal social network. The news feed is the core experience with e-mail and calendar available through pop-up windows. Interesting evolution from traditional e-mail in-box. Lotus is effectively replacing the inbox with the social network.

Documents can be edited directly from browser. Workflow is overlaid to enable tasks to be assigned to others on a team from within the document. Those assignments go directly into a user’s activity stream.

Statistics are available about activity in any community you manage. “Do you ever wonder who are the most active members of your communities or what content is most popular? Now you have those statistics instantly.”

There’s also a cool, quick demo of a coming group video feature (technology provided via Polycom). Looks just like Google Hangouts.

The demo also shows integration with back-end content management systems so that community managers can share content such as PDFs and Word docs from within the Enterprise Content Manger directly with the community. Content can be organized by various views, including a paper.li-like custom news page and topical filtering. “This is the destination for all your work actions.”

The next demo shows IBM Docs. This is collaborative Web-based editing performed in the cloud or on premise. Social content management can unlock the content stored in every repository and enable new business processes. The new release of Notes Connections (available now) will make it easier to share content. Users can view a stream of user comments in a Twitter-like view. New Sametime integration intercepts messages and re-routes to the appropriate communication server,such as Apple messaging. Directory integration enables dial-back from a Sametime message for a voice/video call.

Business partners Polycom and Aruba Networks provided the platform integration for these features.

New mobile systems management features enable organizations to do a partial data wipe on a mobile device in order to maintain enterprise security without erasing user data.

Larry Bowden, VP, Web Experience Software, IBM shows the new IBM Customer Experience Suite. Noting that 30% of customers abandon Web pages within five seconds, he highlights the close-to-real-time analytics built on top of a scalable social network.

The IBM Customer Experience Suite is aimed at making it as easy as possible to reach mobile customers, deliver engaging experiences and apply analytics for informed decision-making. The beta of the suite is available now. This includes Portal & Community Pages, Web Content Manager and Web Experience Factory.

A demo show how a website manager can use a tablet to change a company website to deliver an optimized experience on any platform. The resulting site can resize and present content according to the capabilities of the device. This might be a click on a desktop or a swipe on a tablet. Integrated content management enables content elements such as text and video to be dragged, dropped and published. The content team can then be notified through an annotation feature that draws on the screen and shares those markups with others.

Surveys and user comments can be quickly added to content and made part of the published page. In-line analytics overlays visitor activity directly on the published page, making it simpler to identify trends. Survey/poll results can also be viewed instantly.

A social analytics demo shows data from SAP overlaid on sentiment analysis information from social monitoring tools (below). This helps a business to understand in near real-time how customers are reacting to news or a new product and how that’s reflected in sales from transaction systems.

User Presentations

Kurt De Ruwe, CIO Bayer MaterialScience

A division within the company wanted to take advantage of the knowledge and expertise distributed throughout the company’s worldwide operations. This division makes materials for the auto industry, where a 10% weight reduction yields a 5% energy consumption reduction. Bayer MaterialScience was looking for new lightweight materials.

IBM Connections was installed out of the box and made available without formal training. The first deployments were small but the software was so easy to use that it grew to several thousand users within 18 months. “By next month, over 125,000 internal users and business partners will have access to Connections.”

One of the most useful features is the tag-based user directory. Previously, employees had to find others within the organization by downloading and searching Excel spreadsheets. With the tagging function so, people can be found by expertise, location, title, division, etc. Bayer now has 54,000 profile tags in Connections, and the rapid and always-current directories is transforming the way people work together.

Collaboration in Medicine

The session features presentations from two users in medicine.

Denise Hatzidakis, CTO of Premier Healthcare Alliance said, “At Premier, being exceptional means doing what we need to do so members can remain among the top hospitals in the country. We use the power of collaboration to lead transformation to high-quality, cost-effective health care.”

“Kids are the new normal. They think nothing about connecting with people and sharing actionable information. Health care information is easy to find, but useful data is hard to find. People are treated episodically by providers who only hlave access to a limited amount of information in a short exam.”

Getting health care providers to interact social is a big challenge. Data doesn’t flow easily. Premier has to find the trigger points that stimulates action. The requires collaboration across the industry.

The U.S. is plagued by 80 million health care mistakes a year, causing $800 billion in waste. The biggest fault point is in data handoff. In our business, operating socially improves outcomes and saves lives. Connected care is becoming the new normal, enabling providers to easily share knowledge. This addresses the biggest challenge health care providers face today: improving quality while reducing cost.

Premier is building a new platform that will allow it so measure, gain insight and imnprove the health of our populations. Data and social tools will be embedded in daily work. Patients will have greater certainty they’re getting the most effective treatment possible and the platform integrates expertise from the best health care providers in the nation.

The wrap-up speech was by Dr. Jeffery Burns, Chief of the Division of Cricital Care Medicine at Children’s Hospital in Boston

“I’m convinced medicine can’t move forward without collaboration with you,” he told the audience. Dr. Burns (left) told the story of working with a team of 20 doctors and nurses to save the life of a girl stricken with a bloodstream infection. “It was shutting down her vital functions: I was anxious about whether she could survive this,” he said. After multiple interventions and many tense moments, the girl was saved. “Last Hune I spoke to her mother and she told us how the girl had just finished sixth grade,” he said. “That is the greatest reward of my work.”

Dr. Burns was able to apply the lessons he learned to helping physicians in Guatemala City save a girl there who suffered from a similar condition. The physicians used telemedicine to consult between their locations. When the doctor later met that little girl he marveled, “My God, we did this over the Internet.”

Collaboration is instinctive to today’s young people. Dr. Burns’ 15-year-old son plays video games with people in faraway locations whom he has never met with the help of services as elo boost offered from the other site of the world. “He was doing the same thing I was doing: working in teams, breaking down tasks, forming hypotheses and testing hypotheses. These are scientific skills but in a game format,” he said. The potential exists to revolutionize medicine through these techniques.

“Ten million children die every year of preventable diseases,” he said. “There aren’t enough doctors and nurses trained to take care of a critically ill child. We need a solution that works as well in resource-constrained environments as in resource-advantaged ones.”

Childrens ia building a solution in partnership with several other hospitals. It enables health care providers to access the information they need ot provide care to critically ill children from anywhere in the world. Underlying the collaboration platform is a social network that enables experts to share their wisdom with those who might need it. Participants can then interact through avatars to transfer knowledge and discuss. Expertise gleaned from one intervention is thus available to everyone on the network. The underlying platform is IBM Connections.

Other User Presentations

Kurt De Ruwe, CIO Bayer MaterialScience

One division at the company was trying to take advantage of knowledge and expertise distributed throughout world. The division made materials for the auto industry, where a 10% weight reduction yields a 5% energy consumption reduction. Bayer MaterialScience was looking for new lightweight materials.

“From the start we were aware that the main challenge would be to change the culture” DeRuwe said. IBM Connections as installed out of the box and made available without formal training. The first deployments were small but the software was so easy to use that it grew to several thousand users within 18 months. “By next month, over 125,000 internal users and business partners will have access to Connections,” he said.

The deployment is opening up the culture at Bayer by making it easy for people to reach across organizational lines to find expertise. Rather than maintaining employee listings sers in Excel, Bayer now uses a tagging function so that people can search for others by expertise, location, title and other factors. Bayer has 54,000 profile tags in Connections, and the ability to find people in real-time by latest meta information without having to download and open spreadsheets is transforming the way people work together.

Joerg Dreinhoefer, GAD

GAD is a leading provider of secure processing capabilities to 430 banks in Germany. Dreinhoefer described how the company noticed consumers using iPhones, iPads and tablet PCs to conduct banking transactions. Banks needed to accommodate these changing preferences, so GAD created an initiative called Wave to not only address changes in consumer technology but also deal with cost pressures, core process refinements and regulatory and legal requirements in Germany.

The system basically ties together an assortment of systems that were built for different input/output devices into a single browser screen. “Bankers can now be independent from a local client-server environment and leverage mobile devices.” This has yielded a reduction of operational expenses and operational efficiencies, since offices can be set up with much less overhead.

The initiative also includes Bank21, a browser-based solution in a private banking cloud. It was developed to be indpendent of end-user devices and to use open standards to reduce complexity. “It’s the first end-to-end browser-based retail banking system that solved the connectivity problem between all banking devices,” Dreinhoefer said.

“We have had to reform our own processes to deliver this capability,” he added. New collaboration tools are now deployed internally via an app store metaphor in which bankers can order new products as if they were on Amazon. A Web-based office suite enables live documents to be exchanged between people with full audit tranils to show who worked on a document and when. All back-end integration is handled in the cloud.

This is one in a series of posts sponsored by IBM Midsize Businessthat explore people and technologies that enable midsize companies to innovate. In some cases, the topics are requested by IBM; however, the words and opinions are entirely my own.

A quartet of new research reports suggested that small and midsize businesses (SMB) are rapidly waking up to the potential of social media and cloud-based infrastructure to create new operational efficiencies and better engage customers – and that they may also be leading the US out of recession.

A recent survey of more than 2,000 small businesses by e-mail marketing provider Constant Contact found that 81% say they now use social media for marketing, up from 73% in the spring. Furthermore, a significantly larger percentage agreed with the statement that social media marketing is “easy to use,” “doesn’t take up too much time,” and “works with my customers” than did so in the spring. Facebook was identified as the most effective tool by a comfortable margin, but Twitter, LinkedIn and video sharing are all creeping up.

It should be noted that the majority of respondents to the Constant Contact survey were customers, which means they are already marketing online. Other research studies over more general populations have indicated that small businesses still lag far behind large enterprises in their adoption of social media tools.

It’s also worth noting that 81 percent of respondents use face-to-face interactions to connect with customers or prospects, underlining the fact that Facebook has its limits.

A new global study of chief marketing officers (CMOs) at midsize businesses released today by IBM shows that marketers are concerned about improving customer engagement but are unclear about how to proceed. More than seven in 10 respondents said they aren’t sure how to improve customer loyalty at a time when peer reviews and open sharing are making customers more informed, more critical and less loyal. Only 40% are taking the time to understand and evaluate the impact of consumer-generated reviews, blogs and peer rankings on their brands.

The CMO research further reveals that 62% say they are unprepared to take advantage of the opportunities presented by mobile commerce and 72% say they don’t know how to cope with declining levels of brand loyalty that could result from easier comparison shopping. So while midsize firms may be using social marketing, they aren’t necessarily confident in the results.

There is no question that the concept of “social business,” which is being promoted by IBM and others, is gaining traction. Social business involves using tools both inside and outside the organization to unearth knowledge, improve business responsiveness and create new paths for engagement with customers. The concept has gained momentum in the form of “intranet 2.0” platforms, which augment traditional intranets with Facebook-like features.

An IBM study of more than 4,000 Information Technology (IT) professionals from 93 countries and 25 industries found that adoption of the social business concept is erratic and geographically influenced. Indian companies were three times as likely to have embraced social business concepts as Russian companies. The US and China showed strong adoption rates, but both lag India by a significant margin. The research, which was conducted by IBM’s DeveloperWorks organization, also showed rapidly growing acceptance of cloud computing as a platform for application development and a swing toward developer preference for the Android mobile operating system.

If, as many people believe, small and midsize businesses are leading indicators of economic growth, then there’s also good news in survey of 1,295 small and medium business IT professionals conducted by Spiceworks. The study found that IT budgets grew 9% in the second half of 2011 compared to the first half. That’s the largest increase in two years. Nearly one third of SMBs said they are planning to hire new staff, which is also an improvement over the stagnant staffing rates of the past two years.

Disclosure: IBM’s Midsize Business organization is a client of Paul Gillin Communications.

Live-blogging from the IBM Watson University Symposium at Harvard Business School and MIT Sloan School of Management. Additional coverage is on the Smarter Planet Blog. .

Closing Remarks By Martin Fleming, IBM Chief Economist

If we look at the global economy over the last 250 years, we’ve seen five waves of technology change:

Industrial Revolution

Age of Steam and Railways

Age of Steel, Electricity and Heavy Engineering

Age of Oil, Automobiles and Mass Production

Age of Information and Telecommunication

The Next Big ThingThis is one in a series of posts that explore people and technologies that are enabling small companies to innovate. The series is underwritten by IBM Midsize Business, but the content is entirely my own.

We’ve seen similar characteristics of each change. One is that we’ve gone through a stage where technology is applied to existing processes. Early factories were still vertically structured near bodies of water. It wasn’t for years that people restructured factories around the new machines.

I can remember when people were paid in envelopes of cash. Then we had payroll checks and now we manage our benefits via the Web. Technology enables us to change the way we do things.

Another example is that we have changed the way we consume media because of the iPhone and iPad, and this has altered fundamentally the media industry.

A third example is Watson in a health care context. This can allude to the democratization of health care, where the practice of health care is altered because of the technology. The whole concept of evidence-based medicine is an important new development.

Each of these five waves has been interceded by a crash in the financial markets. We’re beginning to understand this phenomenon.

When the global economy was declining in 2008, the decline in world trade and industrial production was actually steeper than in the 1930s. The decline didn’t last nearly as long (I would assert because of more assertive economic policy) but it was very steep.

The increase of public and private debt and the concentration of wealth in the financial sector also correlate to historical trends.

As we came to the end of the 1990s, we had opportunities that were typically high in ROI that were increasingly difficult to find. The financial sector had to look to new ways to deliver high returns to their investors. So you had the creative of things like sub-prime mortgages and derivatives. We also saw a reduction in bank regulation because the memories of the previous episode had faded. We also had financial structures in place, like pension funds, that were unsustainable in the new environment.

So we’re seeing new models appear. We’re creating ways to use the new technologies as the old technologies wind down.

When we look at fixed-investment spending, starting in the late 19th century the wave of investment grew rapidly. Then it slowed in the early 20th century and nearly stopped in the 1930s. But then there was a burst in the 1940 and 1950s, another slowing, and now we’re in a period where there is almost no growth. Labor hours and labor productivity showed similar shifts. Real interest rates also went through a similar increase and decline.

I don’t want to say this is a cycle. There is a very stochastic set of events that are occurring, but there are some similarities.

What does this have to do with Watson? The economy is beginning to open up opportunities for innovation. Demand for skills is shifting. It will likely be the case that in some job categories there are insufficient numbers of workers, which will cause assets to be created that reduce skill requirements.

This set of changes are in line with what we’ve seen with Watson capabilities.

The Next Big ThingThis is one in a series of posts that explore people and technologies that are enabling small companies to innovate. The series is underwritten by IBM Midsize Business, but the content is entirely my own.

David Autor

Autor: The idea that machines eliminate jobs is a fallacy. A century ago, 38% of the US population worked on farms. Today it’s 2%. But we don’t have 36% unemployment. We’re in a period where the scope of what can be done by machinery is expanding rapidly. If we look at 10 categories of occupation (shows a chart), there are three categories: Low-paid positions like food service work; mid-level, relatively low-paid positions like clerical jobs; and relatively highly paid jobs like professional, technical and managerial.

What we see is a decline in operative production jobs and clerical/administrative support jobs. The middle third are the jobs that are declining most quickly. Should we be worried about that? Probably, because it can lead to policies that are intended to preserve these positions instead of moving toward the jobs that are growing.

Wladawsky-Berger: About 80% of the job growth is in information-intensive service jobs. We’re living in a time of sustained high unemployment and this is concerning. Who will pick up the challenge of providing these jobs? People are looking to large businesses, but they are shedding these jobs along with everybody else. Others look to government, but in my experience government won’t do that.

Wladawsky-Berger

The top-down approaches aren’t going to work, but neither do I want to tell people that they’re on their own and that they have to take a more entrepreneurial approach. The world is becoming more entrepreneurial.

Levy: Everything we see here is colored by the recession, but this recession doesn’t have much to do with computers, it has to do with housing bubbles. The mid-skill decline is very real. Development is very uneven. Natural language processing has improved a lot, machine vision hasn’t and technologies like judgment and practical sense really haven’t gone anywhere.

People look at the Google truck and say it’s remarkable that it’s gone 2,000 miles without an accident. What really happened was that Google made detailed maps of the infrastructure it would be traveling. Without that infrastructure, this car doesn’t have the driving ability of a 16-year-old who just got a permit. So while this technology is promising, the Teamsters shouldn’t be protesting yet.

Brynjolfsson: Is there a future for the people who have those kinds of jobs?

Wladawsky-Berger: It has to be more entrepreneurial than top-down. The kinds of jobs that MIT and Stanford graduates have don’t scale very well. Small businesses don’t tend to create many jobs.

Can we apply technologies that have traditionally been available only at the high end and make them easier to use? Can there be new retail services, trades, sustainability-oriented businesses where these skills can be applied?

Frank Levy

Levy: I can give you an example of one of our graduates who is now running a business making high-end stationery. It’s a good living, but it’s a small piece of the market.

Autor: in a lot of countries there are businesses that we might call entrepreneurial but which are really people just getting by. Most people want to be employed. When the economy booms, people tend to stop working for themselves and go to work for other people. Asking people to create new jobs is asking a lot.

Wladawsky-Berger: Will global enterprises create these jobs? they’re becoming more distributed and moving a lot of tasks to the supply chain. A lot of people in the supply chain could be these mid-skilled people.

Autor: Cleaning restrooms requires a lot of flexibility, but it’s not entrepeneurial.

Erik Brynjolfsson

Brynjolfsson: So what skills should we be training people for?

Levy: One of the problems is you’re problem-solving by analogy. In the old world, where you were problem-solving by algorithm, it was pretty simple. Now you need to understand how things are similar and how you would use analogies to make decisions.

Autor: Germany has done a good job by training for needed skills and by reducing wages and increasing flexibility. It was painful, but when the shock hit, they were able to handle it better.

The US has a very good system for elite education. We don’t have a particularly good way to handle the people who can’t go to college. The traditional feeders like unions and apprenticeships aren’t as available today. The jobs that are emerging are those that require some level of post-high-school education. We have an incredibly big for-profit post-high-school education sector, but the only guarantee you have is that you’ll come out with a lot of debt. We’re squandering a lot of mid-level talent.

Levy: When you’re talking about a lack of training for people oer 30, you also have to look at where we are in training people under 18. That’s a problem in the pipeline.

Wladawsky-Berger: For these mid-skill jobs you need post-high-school education. I’m not saying a BA in English – in fact, that might be a bad idea – and I’ve been hoping that government agencies would decide that this is better than paying welfare and unemployment.

Autor: Health care will grow and there will be opportunities. If I were asked what people should study for, I’d say a health care worker. I don’t think we’re over-investing in college, I think we’re under-investing in other areas. The high school graduation rate is falling for males in the U.S. We ought to think carefully about how we would use that talent for a set of opportunities that’s appropriate. They need skills beyond the generic skills they find in high school. They need vocational education.

Levy: In the case of medical care, the whole issue of judgment is very important. When you’re talking about eliminating unnecessary procedures, there’s quite a bit of judgment involved. These are not problems that machines can address.

Autor: Look at an example of something that’s been automated out of value: Horses used to be our main form of locomotion but now they’re hardly needed. The difference between people and horses is that horses don’t accrue wealth from the internal combustion engine and we do. We’re getting wealthier collectively but not individually.

Audience question: I’m concerned with how we communicate these changes who aren’t economists so we can avoid reactions like what happened with stem cell research?

Wladawsky-Berger: The consensus of everything I’ve read is that when we transitioned from the agriculture to the industrial age, literacy went way up. High school became the ticket to the mid-skill, mid-pay class. In today’s world you need the next level of education: information-based literacy. You need to be comfortable working with information and you need social skills. This prepares you to be much more flexible in the new working environment. People who learn to use these tools can make a good living.

Audience question: It seems that our society fails people who need to change careers. Our unemployment system doesn’t encourage people to try new things for fear that they may lose benefits. Our education system also doesn’t foster skills training.

Autor: We have very little of what other countries call activation systems for people who have lost their jobs. We have a trade-adjustment system that does a terrible job. The problem is that the Republicans hate trade adjustment and blame everything on trade, and the unions hate re-skilling. So we have trade adjustment, which does very little.

Audience question: What about the possibility of trading off standard of living for other benefits, such as fewer work hours?

Autor: There’s a societal choice to trades off work for standards of living. You can work two days a week and make less money and some people might choose that. But we want to work less and have higher standards of living. We have more and more, but the rewards are concentrated in fewer hands. Having more rewards doesn’t solve the skill problem.

Wladawsky-Berger: I think we need more collaboration between the private and public sector. So the government does more to help people while they’re training for jobs, but the jobs are provided by the private sector.